Baghdad Luxury at $300 a Night

The Coral boutique hotel in Baghdad is the first of its kind in Iraq, where the majority of hotels are government-run hulks or family-run motels as the country benefits from a recent oil boom. Video by WSJ's Sam Dagher via #WorldStream.

By

Sam Dagher

Nov. 2, 2012 8:24 p.m. ET

Iraqi troops and a military Humvee stand outside Baghdad's Coral Boutique Hotel, a gleaming aluminum-and-blue-glass building that recently rose up here. At the door, muscled security guards wear bright blue T-shirts that read, in English, "Let us impress you."

Ugandan bellboys in maroon caftans greet guests. Dreamy lounge music wafts through a marble-and-wood lobby. Upstairs, a satin-curtained suite runs as high as $300 a night.

The luxury hotel, which opened in August, is the first of its kind in Baghdad, where lodging choices are mostly limited to family-run motels and government-owned hulks from the 1970s and '80s. Opening a place like this would take, by definition, a risk-taker—in this instance, Emad al-Yasiry, who said that his past forays have included smuggling oil in defiance of United Nations sanctions in the 1990s.

Baghdad is hobbled by political gridlock, corruption, shoddy infrastructure and concerns about security in a newly inflamed region. But it's also in the midst of what Mr. Yasiry and others see as the first stage of a boom, as the capital of the oil-rich land becomes a magnet for foreign companies and deal-makers. In August, Iraq overtook neighboring Iran as the second-largest oil producer in the Organization of the Petroleum Exporting Countries. In September, the government unveiled plans for infrastructure projects worth almost $42 billion. Last week, it approved an annual budget of about $119 billion.

ENLARGE

A newlywed couple is congratulated by guests for their wedding party at the Coral Hotel in Baghdad.
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Other Iraqis seem to share his out-sized ambitions: Down the road, the Central Bank of Iraq has commissioned the world-renowned (and Iraqi-born) architect Zaha Hadid to build new headquarters. Across the Tigris, a new $100 million shopping mall is on the rise close to the Mansour neighborhood, where fast-food restaurants with décor bordering on garish and names verging on familiar—Florida Fried Chicken, Pizza Hat—do brisk business.

Mr. Yasiry, a 43-year-old scion of a Shiite clerical family who favors jeans and Italian dress shirts over turbans and caftans, is also a shareholder and board member in Pepsi Baghdad. He distributes French luxury cigarettes and Saudi dairy products as well.

But building and operating the hotel, he said, has been an enterprise like no other in his career. He's contended with hurdles and extra costs that continue to stymie all private initiative in Iraq.

Mr. Yasiry had to pay bribes to layers of government functionaries to keep the project going and to import quality materials and experts, he said, echoing other entrepreneurs' accounts of what they say is a fact of business here. The project lasted nearly two years and cost $13 million, he said. He describes a shouting match he had earlier this year with Baghdad municipal inspectors who wanted to pour gravel or concrete over the hotel's newly manicured garden, citing obscure rules. The dispute ended with a call to the mayor.

Saber al-Issawi—the mayor at the time, who has been dogged by corruption charges and submitted his resignation in September—couldn't be reached for comment. The head of municipal public relations, Hakim Abdel-Zahra, conceded that corruption remains a problem but said that the city government is trying hard to weed it out, especially in big projects. "We cannot control 14,000 employees," he said, an argument similar to one made by the central government.

In a report to Congress this past Tuesday, the U.S. government's Special Inspector General for Iraq Construction said that corruption remained one of the main obstacles to democratic progress in the country, citing a senior Iraqi official as saying that $800 million is illegally siphoned out of the country every week.

Corruption and shoddy work plagued a $300 million project to renovate a handful of state-owned Baghdad hotels for an Arab summit held in the Iraqi capital earlier this year. The result was partial or patchy upgrades in some instances, rooms decked out with cheap, glitzy Chinese- and Turkish-made fixtures and furniture in others. And service sometimes left a lot to be desired, with most of the staff lacking some of the most basic skills to handle guest needs. So Mr. Yasiry personally supervised the entire building process of his hotel. He hired Emirati, French and Omani companies to custom-make everything from the hotel finishing to the fine wood furniture and carvings and the bedding and pillows. To ensure continuous power for the 82-room hotel, Mr. Yasiry said he has to rent a vacant plot nearby to house three generators.

Mr. Yasiry also has grappled with entrenched cultural traditions that don't intrude on the operations of most luxury hotels. His main clients are foreign business executives, and the hotel's Mood Café was packed on a recent morning with Americans, Germans, Iranians, Italians, Turks and Syrians. But on weekends, the place is overrun by young Iraqi newlyweds with rising means.

The Coral Hotel in Baghdad. Khalid Mohammed/Associated Press for The Wall Street Journal

According to Iraqi custom, families accompany newlyweds to their hotel room in a hail of ululation, singing and clapping. A family member then waits in the lobby for the groom to produce proof of the bride's virginity. One such event went wrong, said Mr. Yasiry, leading the groom's brother to announce that if he didn't receive the necessary evidence, he would "go up and slaughter the bride." Parents and siblings of the couple hurled accusations at each other in the hotel reception area, and security guards led them outside, where a scuffle broke out. Despite the family's plea, Mr. Yasiry refused to let the newlyweds back in.

Staffing and maintenance also pose problems, according to Mr. Yasiry. While almost 25% of Iraqis are unemployed, it's hard to find sufficiently skilled and motivated workers locally, he said. To avoid the convoluted visa and work-permit procedures required to bring in foreign staff, Mr. Yasiry said that he hired some Bangladeshi and Indian nationals who lost their work at U.S. bases when the U.S. military mission in Iraq ended in December.

Even so, he said, it took more than a month to bring in a technician from Saudi Arabia to reprogram the hotel's electronic locks. The front desk was left to explain to some guests why they were being locked out of their rooms for hours at a time.

If the Coral takes off, Mr. Yasiry said, his next target is the renovation of the city's Babylon Hotel, in which he recently acquired a major stake. A government-sponsored $32 million renovation of the ziggurat-style building has produced few results so far.

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